How do you negotiate consulting rates?

Ask for the budget: too many people write a proposal for a project without having a real idea of how much the client has spent on the work. Of course, not everyone will tell you their budget, as they don't want to miss out on a lower price. But if you explain that you want to correctly match the scope of work with the resources available, many customers will at least give you an indication of the reach they expect. Take the number with reservations, but even if they are giving you little importance, it's better to enter into the discussion of the proposal with more knowledge and not with less.

The compensation margin for the price Negotiating prices is uncomfortable and there is a natural need to want to win all the work you set out to do. It's tempting to give in to any price pressure the customer puts on you, but don't. By reducing the reach as you reduce the price, you'll accomplish a couple of things. First, customers who value the wider reach often pay for it.

Second, your work will be more profitable on average. Finally, you reinforce customers' perception of the value of your work instead of falling into a “discount” position. Of course, you won't always get a higher price or a smaller reach, but make them work for it. Get creative with price negotiations.

More generally, force the customer to exchange something for price concessions, even if it's not within their reach. Offer to reduce the price in exchange for delegating more work to your staff (you could even include a customer member on your team, although this can be a double-edged sword). Or tell them you can do the job at a discount with a later delivery date because it allows you to use your time more efficiently. In general, try to get them to sacrifice something for a substantial discount, because otherwise they will just negotiate prices because they can, not because they are really price sensitive.

Make discounts explicit for the first time Customers often request a discount on the first project, claiming that it should be worth it because they will give you more work in the future. Leaving aside the broader question of whether you should make a discount to get the first project (it might make sense), make sure you make the discount explicit. Include your “official price” in the proposal and exactly how much you are going to spend on the first project. Otherwise, customers will have more influence to use that price as a current rate for future projects.

Years later, some customers have returned to an initial proposal and asked for an equivalent price for those projects. Get a bargaining advantage by showing a higher list price. No matter what type of consulting business you operate, deciding how much to charge clients can be a difficult balancing act. For example, if you're a marketing consultant who specializes in helping telecommunications companies execute hyperlocal advertising campaigns, you might justify charging a higher fee when they hire you to work on a similar project.

We insure all types of business consultants, including IT consultants, management consultants, marketing consultants, and human resource consulting firms. New consultants will be less likely to charge as much as those with a higher level of experience, as companies may be less willing to hire beginners for a consulting project. If your consulting business is large enough to require office space, you'll need to account for monthly rent payments. If you've been in business for a while, use the consulting fees you've charged your previous clients as a general guide, and perhaps modestly increase them on a regular basis.

While there's no right or wrong answer when it comes to how much consultants charge, consider the following tips to help you keep winning new customers and growing your business. Remember that as a self-employed small business owner, your consulting fees should cover more than just your salary. Whether your consulting company has full-time employees or you need to hire contractors frequently to help you with specific projects, you'll need to pay them for their work. Consultants who have established a track record of consulting success on particular types of projects or who work in specific industries can increase their rates based on their added value.

The cost of benefits for you, plus your small business insurance, is likely to be more expensive for your consulting firm than for larger companies, as those companies can benefit from certain tax advantages and economies of scale. If you're a talented IT consultant looking for a contract or permanent position, you know that your skills are in high demand in today's business environment. Setting and maintaining consulting fees can be quite complex for any company, and it can be especially difficult when it comes to pricing consulting services because there is very little publicly available information about current rates. Eliassen Group offers strategic consulting and talent solutions that drive your innovation and business results.


Dominic Mccoard
Dominic Mccoard

Avid foodaholic. Infuriatingly humble bacon nerd. Lifelong beer advocate. Total sushi scholar. Passionate pop culture scholar. Typical travel guru.